* Euro hits one-week low vs dlr <EUR=> at $1.3775
* U.S. FOMC minutes awaited for insight into easing debate
* Dollar hovers around 82 yen <JPY=>, near 15-year lows
* Weak stocks drive down yen crosses
(Adds quote, detail)
By Tamawa Desai
LONDON, Oct 12 (Reuters) - The dollar rose against the euro
and a basket of currencies on Tuesday on a short-covering bounce
ahead of minutes from the U.S. Federal Reserve's meeting, and as
commodity and equity markets fell.
The dollar had been sold sharply as market players factored
in the prospect of more quantitative easing (QE) after the Fed's
rate-setting meeting on Sep. 21, when the central bank said it
stood ready to provide more support for the economy and
expressed concern about low inflation.
But given disparity among the Federal Open Market Committee
(FOMC) members over the extent of more easing, the market
covered stretched short positions as they scaled back some of
their more aggressive QE expectations. A pull-back in global
equity markets and commodities added fuel to the dollar's
bounce.
The dollar dipped against the yen, however, heading back
towards a 15-year low struck on Monday.
The euro <EUR=> fell to $1.3775 on trading platform EBS, its
lowest level since Oct. 5 and a further pull-back from an
eight-month high of $1.4030 hit last week.
By 1127 GMT the euro had recovered to $1.3810, still down
0.4 percent on the day, with traders highlighting a large option
expiry at $1.3800 which could serve to contain the euro into the
1400 GMT option cut-off.
The dollar rose 0.4 percent against a basket of currencies
<.DXY> to 77.735, after hitting a nine-month low of 76.906 last
week.
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Futures positioning http://r.reuters.com/kus26k
TWI FX moves since 2007 http://r.reuters.com/qun86p
Interactive map on tensions http://r.reuters.com/jec96p
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"The market is moving to pare back expectations of QE by the
Fed," said Lee Hardman, currency economist at Bank of
Tokyo-Mitsubishi, adding other higher-yielding assets such as
stocks and commodities were also seeing a correction.
FOMC meeting minutes are due out at 1800 GMT. A Reuters poll
of U.S. primary dealers conducted last week forecast a new round
of quantitative easing would range between $500 billion and $1.5
trillion [], with market players also keen to assess
whether the Fed will adopt a drip-feed or shock-and-awe
approach.
"The majority of the FOMC are in favour of QE but I don't
think the minutes will be alarmist," said Peter Frank, currency
strategist at Societe Generale.
"They would have to be much more pessimistic on the outlook
for the economy to adopt a shock-and-awe approach."
YEN NEAR HIGHS
The going was still heavy for the dollar against the yen,
with the Japanese currency gaining ground on the crosses as
stock prices fell.
The euro fell 0.6 percent to 113.14 yen <EURJPY=R> and the
Australian dollar was also down 0.4 percent at 80.35 yen
<AUDJPY=R>.
The dollar fell 0.1 percent to 81.97 yen <JPY=>, not far
from a 15-year low of 81.37 struck on Monday. Most market
players expect pressure to remain on the dollar/yen pair, with a
test of 80 yen and the record trough of 79.75 yen still in
sight.
(Additional reporting by Neal Armstrong; Editing by Susan
Fenton)
